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Federal Register / Vol. 86, No. 51 / Thursday, March 18, 2021 / Proposed Rules policies with amounts exceeding the maximum coverage under the NFIP, the lender should still match the SFIP
deductible for the amount up to the maximum coverage amount under the NFIP but could exceed the maximum deductible for an SFIP for the coverage over the maximum coverage amount available under the NFIP. However, based on additional investigation, the Agencies understand that these types of tiered deductibles are not common and the guidance provided in the supplementary information may not be practicable. Therefore, the Agencies believe the guidance they are proposing in Q&A Private Flood Compliance 1
with respect to deductibles for private flood insurance policies accepted under the mandatory acceptance provision will be more consistent with private flood insurance policies available in the marketplace and safety and soundness standards.
Proposed Q&A Private Flood Compliance 1 would also provide guidance for accepting flood insurance policies issued by private insurers under the discretionary acceptance provision. Under the Regulation, the policy must provide sufficient protection of the loan, consistent with general safety and soundness principles.
Proposed Q&A Private Flood Compliance 1 would note that among the factors a lender could consider in determining whether a policy provides sufficient protection of a loan is whether the policys deductible is reasonable based on the borrowers financial condition. Therefore, unlike the limitation on deductibles for policies accepted under the mandatory acceptance provision for any total coverage amount up to the maximum available under the NFIP, the proposed answer would provide that a lender can accept a flood insurance policy issued by a private insurer under the discretionary acceptance provision with a deductible higher than that for an SFIP
for a similar type of property, provided the lender has determined the policy provides sufficient protection of the loan, consistent with general safety and soundness principles.
Proposed Q&A Private Flood Compliance 1 would also include a reminder that, consistent with the guidance provided in proposed Q&A
Amount 9 in the July 2020 Proposed Questions and Answers, a lender may not allow the borrower to use a deductible amount equal to the insurable value of the property to avoid the mandatory purchase requirement for flood insurance. This principle would apply whether the lender is evaluating the policy under the mandatory
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acceptance provision or the discretionary acceptance provision.
The Agencies also received questions on whether a lender may require that the deductible of any flood insurance policy issued by a private insurer be lower than the maximum deductible for an NFIP policy. New proposed Q&A
Private Flood Compliance 2 would clarify that a lender may do so under both the mandatory acceptance provision and the discretionary acceptance provision. For the mandatory acceptance provision, the Regulation requires that the private flood insurance policy be at least as broad as an NFIP policy, which includes a requirement that the private flood insurance policy contain a deductible no higher than the specified maximum deductible for an SFIP. Therefore, the proposed answer would clarify that a lender may require a borrowers private flood insurance policy deductible be lower than the maximum deductible for an NFIP policy in connection with a policy that the lender accepts under the mandatory acceptance provision consistent with general safety and soundness principles and based on a borrowers financial condition, among other factors. With respect to the discretionary acceptance provision, the proposed answer would note that the lender need only consider whether the policy, including the stated deductible, provides sufficient protection of the loan, consistent with general safety and soundness principles. The proposed answer would also include a reference to proposed Q&A Private Flood Compliance 1.
Proposed new Q&A Private Flood Compliance 3 would provide guidance regarding whether a lender may charge fees to the borrower for the lenders use of a third party to review flood insurance policies. The proposed answer would provide that the Act and the Regulation do not prohibit lenders from charging fees to borrowers for contracting with a third party to review flood insurance policies, with references to Q&A Fees 1 and Q&A Fees 2
proposed in the July 2020 Proposed Questions and Answers.19 The proposed answer would remind lenders that they should be aware of any other applicable 19 Proposed Q&A Fees 1, adapted from current Q&A 69, lists the four instances in the Act and Regulation when a lender or servicer can charge the borrower a fee for making a flood determination.
Proposed Q&A Fees 2, adapted from current Q&A
70, provides that charges made for life-of-loan reviews by determination firms may be passed to the borrower under certain conditions. See 85 FR
40442 at 4045960 July 6, 2020.

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requirements regarding fees and disclosures of fees.
Proposed new Q&A Private Flood Compliance 4 addresses the lenders responsibility to ensure a flood insurance policy issued by a private insurer meets the requirements of the Regulation if the policy is not available prior to loan closing. The proposed answer would provide that the Act and Regulation do not specify the acceptable types of documentation for a lender to rely on when reviewing a flood insurance policy issued by a private insurer. The proposed answer also would advise that lenders should determine whether they have sufficient evidence to show the policy meets the requirements under the Regulation and that if the lender does not have enough information to determine if the policy meets the private flood insurance requirements under the Regulation, then the lender should timely request additional information as necessary to complete its review. The proposed answer also would suggest some optional steps that a lender could take to mitigate against closing delays.
The Agencies received many questions requesting guidance on whether a declarations page provides sufficient information for a lender to determine whether the policy complies with the Regulation. Proposed new Q&A
Private Flood Compliance 5 would note that the answer depends on the information contained in the declarations page. Under the proposed answer, if the declarations page provides sufficient information for the lender to determine whether the policy meets the mandatory acceptance provision or the discretionary acceptance provision of the Regulation or if the declarations pages contains the compliance aid assurance clause, then the lender may rely on the declarations page. However, if the declarations page does not provide sufficient information for the lender to determine whether the policy satisfies the mandatory acceptance or the discretionary acceptance provision of the Regulation, the proposed answer would suggest that the lender should request additional information about the policy to aid its determination.
Proposed new Q&A Private Flood Compliance 6 would provide guidance on a lenders ability to accept multipleperil policies. Specifically, the proposed answer would clarify that a lender may accept multiple-peril policies that cover the hazard of flood under the private flood insurance provisions of the Regulation, provided they meet the requirements of the Regulation.

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